3 7 5. MGMT 483 Test 1 Supplemental Problems Print these three pages, complete t

ID: 342571 • Letter: 3

Question

3 7 5. MGMT 483 Test 1 Supplemental Problems Print these three pages, complete the problems, and turn in (stapled) by the end of the day Friday, March 2. For the data in the table below, create an exponential smoothing forecast for January of the next year, and calculate the Bias and MAD for the forecasting method. Use an initial forecast of 152 for January and -07. Label and draw boxes around the forecast, bias, and MAD. 1. Index Demand (units) Month January February 2 March April 140 115 August September 9 October 10 November 11 December 12 115 100

Explanation / Answer

Following to be noted about formula for exponential smoothing forecast :

Ft = alpha x Dt-1 + ( 1 – alpha ) x Ft-1

Where,

Ft. Ft-1 = Forecasts for period t and t-1 respectively

Dt-1 = Demand for period t-1

Alpha = Exponential smoothing constant

Month

Demand

( units)

Forecast

Error

Absolute Deviation

Jan

150

152

-2.00

2.00

Feb

135

150.60

-15.60

15.60

Mar

140

139.68

0.32

april

120

139.90

-19.90

19.90

May

135

125.97

9.03

June

130

132.29

-2.29

2.29

July

115

130.69

-15.69

15.69

Aug

140

119.71

20.29

Sept

115

133.91

-18.91

18.91

Oct

100

120.67

-20.67

20.67

Nov

105

106.20

-1.20

1.20

Dec

100

105.36

-5.36

5.36

Jan

101.61

TOTAL:

-71.99

131.27

Accordingly , calculated forecast values for each month and upto January next year is presented in above table

FORECASR FOR JANUARY NEXT YEAR = 101.61

Also following to be noted :

Error = Demand – Forecast

Sum of all Errors = - 71.99

Therefore , Bias = Sum of all errors/ 12 as number of observations = 71.99/12 = 5.99

Absolute deviation = Absolute difference between Forecast value and Demand value

Sum of Absolute deviations = 131.77

Therefore , Mean Absolute Deviation ( MAD ) = Sum of Absolute deviation/ 12 as number of observations = 131.27/12 = 10.94

BIAS = 5.99

MEAN ABSOLUTE DEVIATION = 10.94